Portugal’s government has agreed to pay €55 million ($62 million) to increase its stake in national carrier TAP to 72.5% in order to prevent the airline from going bankrupt.

The government currently holds a 50% stake in TAP after partially privatising it in 2015.

The state originally sold a 61% stake in the airline to Atlantic Gateway – a consortium comprised of Portuguese businessman Humberto Pedrosa and JetBlue Airways and Azul founder David Neeleman – but later increased its shareholding back up to 50% from 34%. This left Atlantic Gateway with a 45% stake, the remaining 5% being held by TAP employees.

Neeleman has now agreed to sell his 22.5% stake back to the government, leaving Pedrosa with 22.5% and employees with 5%.

Portuguese infrastructure minister Pedro Nuno Santos states that “the alternative was insolvency”, adding that “the loss of TAP would go far beyond the effort that we will have to make to maintain it”.

The renationalisation will unlock a €1.2 billion state rescue loan for TAP, which was approved by the European Commission in June but had been subject to approval from the airline’s board.

“The state now takes 72.5% of the capital of the TAP group, ensuring control of the company,” states Portuguese finance minister Joao Leao. “In this way, it is possible to unblock the loan to TAP and avoid the bankruptcy of an essential company for the country.”

Portugal’s government says it will not run the airline following the transaction but will hire “a company specialised in looking for qualified, experienced and competent aviation managers in the international market”.

On 30 June, TAP disclosed plans to further reduce its fleet after first-quarter net losses almost quadrupled to €395 million amid the Covid-19 pandemic.